Ad Revenue on the Web? No Sure Bet

“Ads are an inefficient business model, making indirect revenue as a result of behavior and advertising to people who don’t want to see them or for whom they’re irrelevant,” said Jeff Bonforte, Xobni’s chief executive. “Premium is a very direct and efficient model.”

I wish more people understood this: if ads are working on your site it is because someone has figured out how to monetize your users. (At a multiple of how much you get from the ads!) Why isn't that someone you?

Conversely: if you are not charging money because your users are just piss-poor at actually paying for things (like most apps focused on music -- where most of the cool crowd hums "yar har diddlee dee, being a pirate is alright to be, do what you want 'cause a pirate is free, you are a pirate" under their breath), then ads aren't going to succeed either, because no one wants to buy ads targeting people who don't spend money. (Well, OK, Madison Avenue loves selling those ads and chalking it up to "branding", but advertisers are gradually learning to actually measure ROI on those spends, too, and they're terrible.)

Freemium has its own problem: you have to be careful that your free service is not perceived as "neutered", while still leaving a reason for users to pay you for the premium service. (Expect to see at least two blog posts on HN in the next two days on this topic.)

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Downmodded for Reddit-snark.